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M & M Electrical Contractor, Inc. v. Cumberland Electric Membership Corp.

Court of Appeals of Tennessee, Nashville

November 4, 2016

M & M ELECTRICAL CONTRACTOR, INC.
v.
CUMBERLAND ELECTRIC MEMBERSHIP CORPORATION

          Session Date: September 22, 2016

         Direct Appeal from the Chancery Court for Montgomery County No. MC-CH-CV-CD-1432 Laurence M. McMillan, Jr., Chancellor

          This appeal involves the termination of a contract between an electric power distributor and an independent contractor. After a bench trial, the trial court concluded that the electric power distributor was justified in terminating the contract because the independent contractor materially breached the contract by violating a safety policy and an oral directive from the power distributor. The independent contractor appeals, claiming that the evidence did not support a finding that it violated the safety policy or directive, that such a violation, even if it did occur, did not constitute a material breach of the contract, and that the power distributor was required to give notice and an opportunity to cure any default prior to terminating the contract. We affirm.

         Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Chancery Court Affirmed and Remanded

          David Key Taylor and Bridget Brodbeck Parkes, Nashville, Tennessee, for the appellant, M & M Electrical Contractor, Inc.

          Roger Alan Maness, Clarksville, Tennessee, for the appellee, Cumberland Electric Membership Corporation.

          Brandon O. Gibson, J., delivered the opinion of the court, in which Andy D. Bennett, J., and J. Steven Stafford, P.J., W.S., joined.

          OPINION

          BRANDON O. GIBSON, JUDGE

         I. Facts & Procedural History

         Cumberland Electric Membership Corporation ("Cumberland") is an electric power distributor serving a five-county area in northern Middle Tennessee and headquartered in Clarksville. Cumberland has approximately 36 line crews of its own employees, who perform mostly service-related work on its system. Cumberland has historically used independent contractors for system improvements. In 2013, Cumberland entered into a three-year construction contract with M&M Electrical Contractor, Inc. ("M&M") for distribution line construction work on Cumberland's system between July 1, 2013, and June 30, 2016. The contract required M&M to assemble and utilize four crews, each consisting of five crewmembers. These crews would perform work orders for various projects to be completed during the term of the contract. M&M began working for Cumberland on July 1, 2013, and worked for several months without serious incident.[1]

         The series of events that led to M&M's termination began on April 16, 2014. M&M had received a work order for a project located on New Shackle Island Road in Hendersonville. The New Shackle Island project was very dangerous and complex. It involved moving existing electrical lines onto new poles fifty feet away in order to accommodate a construction project by the Tennessee Department of Transportation. The work was to be performed at a busy intersection near a hospital and a school. As was the case for most of M&M's jobs, the electrical wires would be energized throughout the project, meaning the crews would be performing "hot work." The lines at New Shackle Island were especially highly energized. The job required five to six linemen to move the lines in unison while raised in the air with bucket trucks.

         Admittedly, from day one of the contract period, M&M's co-owners, Tony and Julia Miller, were aware of Cumberland's safety policy requiring all crews to "ground" bucket trucks (and digger trucks) anytime they were performing hot work.[2] Crews would accomplish grounding by utilizing equipment called "truck grounds" or a "grounding chain." The preferred method was to use truck grounds, which consisted of long copper wires fifty to sixty feet long, with one end clamped to the bucket truck and the other end clamped to the "main line neutral" at the top of the electrical pole. When the use of truck grounds was not feasible, due to the distance between the pole and the bucket truck or other circumstances, crews were permitted to use a grounding chain and screw ground, which involved one end of the wire being clamped to the bucket truck and the other end being clamped to a screw in the ground. The goal of these precautionary measures was to prevent the bucket truck from becoming energized if an electrical wire came in contact with the bucket truck. If the truck became energized, it would electrocute anyone touching the truck.

         Despite its admitted knowledge of Cumberland's grounding policy, M&M did not use either method to ground any of the six bucket trucks it used at the New Shackle Island project on April 16, 2014. The reason for this was subject to some dispute. According to Tony Miller, co-owner of M&M, he made the decision to forego grounding the bucket trucks because of the number of trucks and men involved in the project and his conclusion that someone could have been killed if one man made a mistake while all the trucks were grounded to the system neutral. Rather than grounding the trucks, he decided to have crew members "watch the trucks, " forming "a human barricade, " which he claimed was "another acceptable way of watching trucks if you have them ungrounded."[3]According to Tony Miller, he informed Cumberland's system design engineer, Jonathan Fielder, who was on-site, about the decision; however, Fielder had no recollection of the alleged conversation.[4]

         According to Fielder, he first noticed that the M&M bucket trucks were not grounded while having a conversation on-site with Cumberland's supervisor of engineers, David Abernathy. Fielder denied having any prior discussion with anyone from M&M about grounding. Fielder approached M&M's safety director, Terry Eden, to inquire about why M&M's trucks were not grounded, and Eden allegedly indicated to Fielder that "they were working on that." Abernathy similarly understood that M&M's grounds were "being worked on." Abernathy believed that M&M's ungrounded trucks were a gross violation of Cumberland's safety policy, but he also recognized the difficulty presented by the situation because M&M's equipment was located in the middle of an intersection. Fielder and Abernathy did not stop M&M's work on the project. However, Abernathy took photographs of the trucks and called Cumberland's safety coordinator, Chip Miller, [5] to come to the site and assess the situation. When Chip Miller arrived, he also had a conversation with M&M's safety director, Terry Eden, and was told that Eden was in the process of making a more secure connection on the bucket trucks for attaching the truck grounds. Chip Miller told Eden that he needed to do something as far as grounding the trucks, even if it was temporary. Eden said that he would take care of it, so Chip Miller said "that was fine" and did not shut down the job.

         Regardless of the dispute about the reasoning for the decision, the parties agree that M&M did not ground its six bucket trucks at the New Shackle Island project on April 16. The following day, April 17, Cumberland's manager of the engineering division, Mark Cook, spoke with M&M's president and co-owner Julia Miller by telephone and expressed concern about the fact that he had received a report about M&M bucket trucks on the New Shackle Island project that did not have truck grounds. He asked her to remedy the situation. That same day, various engineers and supervisors at Cumberland also discussed the ungrounded bucket trucks that were observed at the New Shackle Island project. Cumberland's engineers believed that a serious safety concern existed that necessitated an internal meeting to address the course of action that would be required of M&M going forward.

         The following day, on April 18, which happened to be Good Friday, an internal meeting was held at Cumberland in response to the grounding issue. Those in attendance included Cumberland's system design engineer for the New Shackle Island project, Jonathan Fielder; supervisor of engineers David Abernathy, who was also on-site and observed the grounding situation with Fielder; safety coordinator Chip Miller, who was called to the site; manager of engineering Mark Cook; and operations manager Randy Holt. Safety coordinator Chip Miller reported that M&M's set up at New Shackle Island was marginal at best as far as getting the work done safely, and he said that he would not allow Cumberland's own crews to use such methods. The group ultimately decided to have Chip Miller, as safety coordinator, call M&M and convey the message that M&M was not to work on Cumberland's system again without the use of grounds on their trucks.

         Chip Miller telephoned M&M on the afternoon of Good Friday and spoke with M&M's president and co-owner Julia Miller. By all accounts, the two had a cordial conversation about grounding and the bucket trucks that were observed at the New Shackle Island project on April 16. Despite the cordial tone, however, Chip Miller clearly conveyed to Julia Miller that he was worried about the way that M&M's trucks were set up that day, and he informed her that someone else at Cumberland had also complained about the fact that the trucks were not properly grounded. By the end of the conversation, Julia Miller admittedly understood that she was "to make sure that our trucks were grounded by Monday morning." Specifically, Julia Miller was told to: (a) have all M&M trucks equipped with grounds by Monday morning, and (b) ensure that measures were taken to ground the trucks anytime they were doing hot work. She understood that all trucks were to be grounded, not just at New Shackle Island, but wherever they were working on Cumberland's system. There was no doubt in Mrs. Miller's mind that effective Monday, April 21, M&M was not to have any truck working on an energized line if it was not grounded. Tony Miller also understood, from speaking with Julia Miller, that Cumberland was directing M&M not to put another ungrounded truck on an energized line in Cumberland's system. Julia Miller told Chip Miller that she would take care of the issue.

         Tony and Julia Miller worked on Easter Sunday to assemble truck grounds for two bucket trucks that M&M had rented, which did not come equipped with truck grounds. However, neither Tony nor Julia Miller contacted M&M's safety director or crew foremen to inform them of the directive from Cumberland, effective the following Monday, to ground the trucks anytime they were doing hot work. Julia Miller explained that she did not feel the need to do so because M&M employed experienced crew foremen who, she believed, always used truck grounds, and they had no prior issues with grounding aside from the project at New Shackle Island. Although Mrs. Miller worked in M&M's office and not in the field with the crews, she was confident that the crews knew to use truck grounds and were consistently using truck grounds when doing hot work.

         On Monday, April 21, 2014, Cumberland's engineers visited three work sites where M&M crews were working in order to determine whether they were in compliance with the directive regarding grounding. System design engineer Jonathan Fielder visited the New Shackle Island project and observed that M&M's trucks there were grounded. David Abernathy, Cumberland's supervisor of engineers, inspected two other worksites. According to Abernathy, at the first worksite, headed by M&M crew foreman Joe Phelps, he observed an M&M crew changing out a pole with energized lines, and none of three trucks being used on the job were grounded. According to Abernathy, he told the M&M crew foreman that the crew could not continue the work until they grounded the trucks. Abernathy then went to a third worksite, under the direction of M&M crew foreman Earl Fuqua. Abernathy observed this M&M crew completing a pole replacement, which involved energized lines, using two trucks that were not grounded. Abernathy again relayed the message that they could not perform any energized work without truck grounds.

         After observing these two crews, Abernathy instructed Cumberland's project engineers to check the M&M crews they oversaw and ensure that they were following Cumberland's safety policies. Abernathy also reported his findings to Cumberland's manager of engineering, Mark Cook. Cook relayed the information to Cumberland's general manager, Jim Coode. Within one to two days, another internal meeting was held at Cumberland to determine how to handle the situation. General manager Coode ultimately concluded that M&M's contract should be terminated due to safety concerns. Cumberland's board of directors had a meeting on Friday, April 25. Coode presented the information to the board at that meeting, and the board approved Coode's request to seek legal counsel and terminate the contract with M&M. On or about April 30, Tony and Julia Miller were called to a meeting at Cumberland's office, where they were presented with a letter terminating M&M's contract based on documented safety violations. M&M worked to complete some open work orders, and Cumberland paid M&M for all work orders that were completed during the contract period.

         On July 2, 2014, M&M filed a complaint against Cumberland in the chancery court of Montgomery County alleging breach of contract and violation of the duty of good faith and fair dealing. M&M asserted that the stated reason for its termination was factually untrue and that it did not materially breach the contract in a manner that would justify termination. M&M also asserted that Cumberland had a duty to provide M&M with written notice of any default and an opportunity to cure the stated reasons for termination. M&M alleged that Cumberland was contractually liable for the profit M&M would have earned under the remainder of the three-year contract had it not been improperly terminated.

         A bench trial was held over the course of three days in September 2015. The trial judge heard testimony from eleven witnesses. M&M conceded that it was aware, from day one, of Cumberland's grounding policy requiring bucket trucks to be grounded to the main line neutral when working on energized lines. It admitted that its six bucket trucks at the New Shackle Island project on April 16 were not grounded. M&M acknowledged receiving the Good Friday telephone call from Cumberland's safety coordinator, directing M&M to have grounding equipment on all trucks and to utilize that equipment anytime it worked on Cumberland's system by the following Monday, April 21. However, M&M disputed whether its crews actually performed any "hot work" with ungrounded trucks on April 21.

         The trial judge heard testimony from Joe Phelps, one of the M&M crew foremen who was allegedly caught performing ungrounded hot work on Monday, April 21. Phelps denied performing any hot work while the trucks were ungrounded. He claimed that his crew had started working on the project at issue the previous workday, and they had to stop because of a sudden rain shower. He said they left their equipment and material up on the lines until the following workday and covered the bucket on the bucket truck due to the rain. Phelps claimed that when they returned to the site the following Monday, April 21, they discovered that the bucket cover had a hole in it, and it was filled with rainwater. Phelps claimed that he raised the bucket in the air simply to drain out the rainwater. He acknowledged that the bucket truck was in use and that Abernathy and another engineer visited the worksite, but he claimed that the crew was not actually performing any hot work at that time. However, Phelps did recall saying that he had forgotten to ground the trucks. He acknowledged being told not to do any work until he had proper grounds for the trucks. He said the crew grounded the trucks thereafter and then replaced the pole.

         David Abernathy, Cumberland's supervisor of engineers who visited the site, testified to the contrary. Abernathy testified that when he arrived at the jobsite with Phelps's crew, they were replacing a pole using three trucks - two bucket trucks and one digger - with none of them grounded. He testified that both bucket trucks had the buckets extended, and people were in the buckets doing energized work. Abernathy said he told Phelps that M&M had been instructed not to perform energized work with ungrounded trucks, and Phelps said he forgot. According to Abernathy, Phelps had to call M&M's safety director and ask him to bring grounds to the worksite.[6] Abernathy called one of Cumberland's project engineers who was working nearby and asked him to come to the worksite. When he arrived, Abernathy went to observe M&M's other crew working several miles away.

         The second crew foreman who was allegedly caught performing ungrounded hot work, Earl Fuqua, was not called to testify at trial. Abernathy testified that when he arrived at this worksite, the M&M crew was completing the process of "changing out a hot pole." He explained that the crew had finished replacing the pole, and the bucket was coming down from the pole while he was at the site. Abernathy conceded that he did not actually see any hot work being performed "with [his] own eyes" because the pole change was completed before he arrived. However, he said that he observed the equipment when the bucket was still in the process of coming down, and neither the bucket truck nor the digger truck was grounded. Abernathy recalled that M&M's digger truck was malfunctioning, and the driver was using an elbow to operate the joystick while using his hand to wiggle wires under the controls in an attempt to get it to operate correctly. Abernathy testified that he told the crew foreman, Fuqua, not to do any energized work without truck grounds and not to use that particular truck ...


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